Adobe expects third-quarter Creative Cloud subscriber adds to exceed second-quarter

Tue Jun 18, 2013 9:02pm EDT
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By Sruthi Ramakrishnan

(Reuters) - Adobe Systems Inc, known for its Photoshop and Acrobat software, reported a higher-than-expected adjusted second-quarter profit and said demand rose for Creative Cloud, the subscription-based version of its flagship software package.

The company said it expects the number of paid subscribers for Creative Cloud in the current quarter to top the 221,000 subscribers who signed up in the second quarter, increasing the total to 700,000. The company added 153,000 subscribers in the first quarter.

Adobe is the latest traditional software company to make a big bet on the cloud-based subscription model pioneered by companies such as Inc, NetSuite Inc and Google Inc.

Subscription models bring in less money upfront as payment is spread over the entire period of use unlike traditional packaged software, but typically ensure more predictable recurring revenue.

Shares of Adobe rose 4.4 percent in after-market trading. They closed at $43.36 on the Nasdaq on Tuesday.

Promotions to drive adoption of Creative Cloud may affect average revenue per user (ARPU) in the short term, but will add to annualized recurring revenue (ARR) in the long term, Chief Financial Officer Mark Garrett said on a conference call with analysts.

"If I can get to a better ARR number with more subscriber numbers at a slightly lower ARPU, I would gladly make that tradeoff because it gets more people on the platform, it gives us more critical mass," he said to Reuters.

Adobe has been shifting to web-based subscription service Creative Cloud from a licensing model since last year.   Continued...

Shantanu Narayen, president and chief executive officer of Adobe Systems Inc., speaks during the Reuters Global Technology, Media and Telecom Summit in New York May 21, 2008. REUTERS/Brendan McDermid